Forex Brokers in Japan
Currency trading is very popular among the Japanese forex traders. Japan is the very first financial market to open during a trading day and is considered to be a significant contributor to the Asian trading session. As a trader in Japan, you have a wide range of international and domestic forex brokers to choose from. Forex brokers in Japan are regulated by the Financial Services Agency (JFSA), which is a Government controlled authority that regulates and supervises all types of financial firms operating in the Japanese financial markets. Whilst trading with a JFSA regulated broker has some benefits, it is not a necessity as there are many forex brokers regulated in other jurisdictions that can accept Japanese traders.
Best forex brokers Japan
To find the best forex brokers in Japan, we created a list of all the regulated brokers that accept residents of Japan, then ranked them according to our overall rating. Below you can see our list of the top forex brokers for Japan.
ASIC, BaFin, CFTC, DFSA, FCA, FINMA, FMA, FSA, FSCA, JFSA, MAFF, MAS, METI, NFA
JFSA forex brokers in Japan
When it comes to forex trading, choosing a suitable broker is the major task and selecting a regulated forex broker from the hundreds of brokers out there is one of the most important decision that you will make.
It is always better to trade with a regulated broker as it is the best way to protect yourself as well as your investment. In case you reside in Japan and want to start trading from there then the you might want to look for a broker who is regulated with the Japan Financial Services Agency.
The Forex sector is well-regulated in Japan and falls under the oversight of the Japanese Financial Services Agency (JFSA). Japanese-licensed brokerages are considered some of the safest to trade with due to the strict regulatory regime in the country.
The FSA of Japan is responsible for maintaining the integrity of the Japanese economy by actively monitoring the day to day performance of financial companies from the banking, insurance, securities, and investments sectors. The FSA was formed in early 2000 with its headquarters in Tokyo and is run by Ministry of Finance that reports directly to the Japanese Government.
FSA Forex brokers offer several levels of protection to Forex traders from Japan, and all traders are protected against broker insolvency and other broker issues through the Japanese Investor Protection Fund. The JIPF was instrumental in compensating investors in different financial sectors and is considered as one of the most effective compensation programs offered by any country in the world.
How to verify JFSA regulated brokers in Japan
The first step if you are interested in trading forex or other financial instruments in Japan, is to find a suitable forex broker. Trading in Japan is available via various brokers that operate in the region and internationally. You have two main choices here. You can either open an account with a broker based in Japan or open an account with an international broker that gives clients access to the Japanese stock exchanges.
To identify if a forex broker is authorised to operate in Japan, you can get the brokers regulation number from the disclosure text which you should be able to find at the bottom of the brokers homepage. Following on from that, you can look up the brokers regulation with the JFSA register to confirm if the broker is licensed in Japan.
Is forex trading legal in Japan?
The JFSA, the nation’s financial authority, makes every effort to prevent local traders from making investments with brokers who hold licenses from other jurisdictions. This is one of the primary causes for which numerous overseas trading firms seeking to enter the lucrative Forex market have chosen to open offices in the Land of the Rising Sun. To achieve that, though, they first need permission from the regional financial watchdog.
The events of January 2015, when the Swiss National Bank (SNB) abruptly chose to scrape off the peg for the EUR/CHF pair, which caused panic and confusion on the international financial market, had a significant impact on many of the regulations outlined by the JFSA.
Many brokerages went out of business over night as a result of the sharp increase in the value of the CHF and were unable to refund their clients’ money. Due to the high leverage given for some items, traders’ accounts all around the world experienced extreme unfavorable changes (up to the impressive 500:1 in some cases). Many consumers feared that their brokerages would demand that they return the money so they could make up for the enormous losses.
Financial regulators around the world, including the Japanese one, imposed limitations on the maximum leverage that retail consumers may employ as a result of these events. Many enacted negative balance protection laws to shield ordinary traders from suffering losses greater than their account balances. Sadly, Japan has not yet made negative balance protection available to local retail customers.
Certain leverage limitations must be followed by locally accredited brokerage firms. In Japan, leverage was decreased twice. The first modification took place soon after the 2008 Great Financial Crisis. The JFSA then agreed to reduce the maximum leverage level to a 50:1 ratio.
The financial regulator then made the decision to further reduce this in order to lessen the volatility brought on by changes in currency. Leverage was further decreased to a ratio of 25:1, the lowest possible in the world.
When providing services to Japanese retail customers that use margin to trade the Forex markets, all locally registered brokers are required to adhere to this reduction. The Tokyo Financial Exchange (TFX), where futures are traded, is the sole organization free from the restrictions because it does not engage in over-the-counter (OTC) items.
In 2017, the Japanese regulator announced plans to further lower the leverage cap from 25:1 to 10:1, taking another shot at the local forex market. These proposals were, however, abandoned in May of the following year as a result of strong criticism from both traders and Forex trading companies.
However, locally regulated brokers that provide margin trading are required to go through stress tests to ensure they have enough capital to survive unforeseen price changes like those that occurred in 2015.
For the time being, leveraged forex traders don’t need to fear, but those who trade cryptocurrencies on margin cannot say the same. The JFSA put forth a fresh proposal in January 2020 to reduce the leverage cap for margin trading on cryptocurrencies from its current rate of 4:1 to 2:1. In April of the same year, the regulator plans to put the rule into effect.
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